Compound Interest Calculator

The rate is only half the quote

"5%" does not describe an account on its own. Five percent compounded once a year pays 5%. The same 5% compounded daily pays 5.13%, because the interest starts earning interest four hours after it is credited. The rate and the schedule are one quote, and a bank that prints only the first is telling you half of it.

That is what APY exists for. Enter the nominal rate and the schedule here and the calculator shows the effective annual yield beside it — the single number that makes two offers comparable.

Why it feels slow, and then doesn't

Interest on interest is the whole trick, and it has nothing to work with until the balance is large. The early years are you doing the lifting.

Put $250 a month into 5% for ten years and you finish with about $47,000, of which $35,000 is money you deposited. Interest earned $325 in the first year and $2,210 in the tenth — the same rate, on a balance that got seven times larger.

So the calculator marks the period where the interest first earns more than you deposit. At 5% with $250 a month, that year never arrives inside a decade. At 7% over thirty years it lands in year nine. Seeing where that line actually falls is worth more than any number on the front of a brochure.

When the deposits land

A deposit made at the start of a period earns interest for that period. One made at the end does not. Same money, same number of deposits, and the difference over ten years of $250 a month is about $160.

Deposits are counted whole, too. Fourteen months of quarterly deposits is four deposits, not four and two thirds — the fifth has not been made when the clock stops, so nothing here pretends it has.

Where this fits

• Do: Savings, CDs, and anything with a stated rate

  This is the arithmetic those accounts actually run. If you are choosing between two of them, the effective yield is the comparison.

• Do: Sizing a habit

  What $50 a week turns into, and how much of that is interest rather than the $50s. The answer is usually "mostly the $50s", which is the honest and useful part.

• Don't: Treat a market average as a rate

  A 7% long-run stock return is an average of wildly different years, not an interest rate. A real portfolio takes the bad years in a different order than a calculator does, and the order changes the answer.

• Don't: Plan around a variable rate for long

  A savings rate is a rate for today. Over anything longer than a CD's term it is a guess, which is why the table shows what other rates would have done.

What this doesn't do

It does not model tax, and interest from a savings account is ordinary income in the year it is paid. It does not model inflation either: $47,000 in ten years buys less than $47,000 buys today, and the gap is larger than most of the interest on this page.

It assumes a rate that holds for the whole horizon, deposits that never change or miss, no fees, and nothing withdrawn. It uses a 365-day year, so a leap year is a day's interest out. Interest is not rounded to the cent each period the way a bank would — over a long horizon that difference is real but small, and it runs against the saver rather than for them.

And it answers what a plan grows to, not whether it is the right plan. Filling a savings account while a card charges 22% is the wrong order, and the payoff calculator will show you why in a sentence. If you want a second set of eyes on the whole picture rather than this one number, that is what the sessions are for.